Earnings Call Transcript - VALN Q4 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to Valneva's Full Year 2025 Results and Business Update Conference Call and Webcast. Operator Instructions: Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Josh Drumm, VP of Global Investor Relations. Please go ahead.

Joshua Drumm, VP of Global Investor Relations

Hello, and thank you for joining us to discuss Valneva's financial results for the full year 2025 and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the year ended December 31, 2025, which were published earlier today, available within the Financial Reports section on our Investor website. I'm joined today by Valneva's CEO, Thomas Lingelbach, and our CFO, Peter Buhler, who'll provide an overview and update on our business as well as our financial results. There will be an analyst Q&A session at the conclusion of the prepared remarks. Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, March 18, 2026, and Valneva undertakes no obligation to revise or update forward-looking statements except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation.

Thomas Lingelbach, CEO

Thank you. Hello, and thank you for joining us today. As we reflect on 2025, I'm proud to say that Valneva once again demonstrated resilience, discipline and an unwavering sense of purpose. In a year marked by geopolitical uncertainty, rising vaccine hesitancy and further consolidation in the biotech sector, we stayed focused, remained agile and continued strengthening our position as an innovative and recognized vaccine company. Our financial performance was solid. Total revenues exceeded EUR 170 million, slightly above 2024 levels, including almost EUR 160 million in product sales. These results reflect not only foreign exchange headwinds and the planned reduction in third-party product sales, but also growth in our proprietary travel vaccine portfolio. We closed the year with a cash position of nearly EUR 110 million and further enhanced our financial flexibility through a successful debt refinancing. We also achieved more than a 20% reduction in operating cash burn, driven by our continued disciplined cash management. Most importantly, together with our partner, Pfizer, we further advanced our Lyme disease vaccine candidate. This program represents an important opportunity for Valneva and for the millions of people at risk of Lyme disease, and we are looking forward—fingers crossed—for the pivotal Phase III results. Turning to how we see Valneva's strategic evolution. Our strategy is geared towards becoming the leading vaccine biotech company based on three important pillars: On the one hand, we expect to further grow our commercial business and to optimize the cash generation through the commercial business. We will certainly continue maximizing R&D upside for our investors, leveraging our proven track record in R&D progression and our ability to bring products from bench to global licensure, and we will do so by leveraging our integrated business model—commercial, manufacturing and development—which can be beneficial to advance and augment programs in our R&D pipeline. Let's look a little bit at the different programs in our portfolio. And I'm now starting, of course, with the leading Lyme disease vaccine candidate in the world, VLA15. So if you look at Page 8 of the presentation, this is a summary that shows you the growing and emerging problem that Lyme disease represents. There is currently no vaccine available to prevent Lyme disease, and treatments are somewhat suboptimal. We are seeing a growing annual burden of the disease with reported almost 500,000 cases in the United States annually. In Europe, it's probably going to be the same order of magnitude; the reported and officially reported cases are a bit more than 130,000 annually. The important thing about Lyme disease is its severe clinical manifestations. Ten to thirty percent of cases develop many different clinical manifestations, which can be categorized in three buckets: carditis, neuroborreliosis and arthritis. And most importantly, five to ten percent of the cases continue to have persistent symptoms following treatment with antibiotics. We are evaluating VLA15 right now in a placebo-controlled field efficacy study called VALOR. This study includes approximately 10,000 individuals. It's a study that is randomized 1:1 placebo against vaccine, with a 2:1 U.S. versus European site allocation per site (North American versus European sites). And the primary endpoint is disease prevention after 3 plus 1 doses, namely in season 2, which we have also tested as part of this study. We completed all vaccinations last year and we are now in the process of testing and evaluating the data. As I said earlier, we hope that we're going to get good data, and we have guided for data in the first half of this year. So in summary, VLA15 is a compelling opportunity in a really underserved market. It would definitely be the first vaccine, if approved, to address this disease. It is a highly differentiated, state-of-the-art vaccine when it comes to the vaccine composition, addressing the main and predominant serotypes of Lyme borreliosis in the Northern Hemisphere. It will represent a compelling target population and a use case with a broad addressable population. We have tested in the study people above five years of age. And we see really an opportunity here to address a very, very large target population. Of course, there is also a strategic fit within Pfizer's vaccine franchise, and we are very pleased to have a strong partner with Pfizer for the future commercial opportunities ahead for this vaccine. And of course, there is a clearly attractive commercial dynamic. Prophylactics are always cheaper than therapy and a potential inclusion in some of the routine immunization schedules for high-risk areas would really be a perfect opportunity. So with that, we see a unique and compelling opportunity that, of course, could be transformational for Valneva. So again, we are looking forward to the data, fingers crossed. So if we turn to IXCHIQ, you know that we are still investing in the further development of what we call VLA1553 or the marketed trade name, IXCHIQ. Currently, we have three major R&D activities on IXCHIQ. We are very glad that we have been able to initiate a pilot vaccination campaign which is ongoing in Brazil. We launched it in February with our partner Instituto Butantan, in selected municipalities in Brazil. We cover the age range currently licensed by Anvisa in Brazil, namely 18 to 59 years of age. And the objective is really to achieve a 20% to 40% coverage within the target population. Right now, the vaccination uptake is quite compelling. We are further investing in post-marketing effectiveness studies to confirm the effectiveness and to optimize the description of the safety profile. This is a pragmatic randomized controlled effectiveness and safety study in adults and adolescents in endemic countries. And of course, we continue to work on ensuring greater access to address the unmet medical need in endemic countries. We are in the process of expanding our network of manufacturing and distribution partners in low- and middle-income countries. So overall, I would say IXCHIQ did not have a great start in the travel segment, but we have been able to refine our labels and discussions, and we are now focusing mainly on post-marketing effectiveness and global market access. Turning to shigellosis. Our program called S4V2 is a vaccine that targets shigellosis. It's a tetravalent Shigella vaccine candidate that we in-licensed from LimmaTech, and it's currently the clinically most advanced Shigella vaccine candidate. Therefore, we see an opportunity to develop a first-in-class vaccine in a life-threatening disease. When you look at the market opportunity and more importantly, the clinical and medical need, you need to recognize that it is currently the second leading cause of fatal diarrhea, especially in children. Therefore, it has been identified as a priority vaccine by WHO. Valneva has worldwide commercial rights upon potential approval. We see here really two major markets. On the one hand, travel—this is certainly a vaccine that could complement our travel portfolio in the adult sector—and probably more importantly, children in low- and middle-income countries. We launched two parallel studies: two Phase II studies, one in infants and the other a combined immunogenicity and challenge study, a so-called controlled human infection model. Both are ongoing, and we expect data from both mid-year. So again, a very important milestone for the company. Subject to data, we're going to decide on the program development pathway forward. With that brief update on our portfolio and our key activities, I would like to turn over to Peter to provide us with the financial report.

Peter Buhler, CFO

Thank you, Thomas, and good morning or good afternoon to all of you. Now moving on to the financial review, starting with details on our top line on Slide 16. Total product sales reached EUR 157.9 million, in line with our guidance and decreasing by minus 3.3% over 2024 or minus 1.3% at constant currency. The decrease in sales is primarily a result of the planned reduction in third-party product sales and to a lesser extent of adverse currency impact. As mentioned by Thomas at the beginning of the call, proprietary product sales, excluding currency effects, grew by plus 9% year-over-year. IXIARO sales reached EUR 98.4 million compared to EUR 94.1 million in 2024, representing a growth of 4.6% or 7.2% at constant currency. The growth in IXIARO sales was driven by the travel segment. DUKORAL sales were essentially flat at EUR 31.9 million compared to EUR 32.3 million in the previous year, a decline of minus 1.2%. At constant currency, DUKORAL sales grew by plus 1.8% year-over-year. Growth in sales was impacted by a distributor change in Germany, a key indirect market. IXCHIQ sales reached EUR 8.4 million compared to EUR 3.7 million in the prior year. This includes the supply of 40,000 doses to the French island La Réunion in 2025. Finally, we reduced our third-party sales substantially year-over-year from EUR 33.2 million to EUR 19.2 million. As discussed previously, this decrease was the result of planned termination of our existing distribution contracts for third-party products in order to focus on our proprietary products. Moving on to Slide 17, looking at the P&L. Other revenues increased from EUR 6.3 million to EUR 16.8 million. The increase is driven by a EUR 10 million revenue recognition related to the Lyme agreement with Pfizer. These EUR 10 million were previously included in refund liability on our balance sheet and represent the amount Valneva no longer expects to owe through future payments to Pfizer. Looking at our expense. Cost of goods and services increased by EUR 8.6 million. Cost of goods in the fourth quarter were adversely impacted by an EUR 8.5 million inventory write-off, mainly related to IXCHIQ following the termination of the contract with the Serum Institute of India. We're talking here about an accounting write-down. The product is still available and could potentially be used for supply under future contracts in the endemic markets. Cost of goods also included approximately EUR 10.8 million of idle costs. IXIARO cost of goods remained stable versus prior year, while DUKORAL gross margin deteriorated due to the failure of manufacturing batches in the fourth quarter. Research and development expenses increased from EUR 74.1 million in 2024 to EUR 85.3 million in 2025. This increase is in line with our guidance and is driven by higher spend in our Phase II Shigella vaccine candidates. Additionally, we increased our R&D investment in our chikungunya vaccine as we are executing on our post-marketing obligations. Marketing and distribution expense amounted to EUR 37.4 million compared to EUR 52.4 million in 2024. This significant decrease is a result of the reduced IXCHIQ spend compared to significant investments in prior launch years. G&A expenses decreased from EUR 42.8 million to EUR 37.3 million, as a result of our continued initiatives to decrease administrative spend across the company. In 2024, Valneva sold the priority review voucher obtained with the approval of IXCHIQ in the United States, which net of expenses resulted in proceeds of EUR 90.8 million. Other income and expense decreased year-over-year by roughly 50% as a result of lower R&D tax credits and to a lesser extent, due to lower grant income in Scotland. In 2025, Valneva reports an operating loss of EUR 82.1 million compared with an operating profit of EUR 13.3 million. The operating profit in 2024 was substantially driven by the nonrecurring income statement of the sale of the priority review voucher. Finance expense includes the cost to refinance our debt with Deerfield and OrbiMed with a new five-year product loan with Pharmakon. Valneva's loss for the period reached EUR 115.2 million, while the adjusted EBITDA is reported at minus EUR 51.4 million. Now moving on to the financial outlook. In 2026, we expect total product sales of EUR 145 million to EUR 160 million and total revenues of EUR 155 million to EUR 170 million. The overall decrease versus 2025 is related to further planned reduction in third-party product sales, offsetting continued growth from our proprietary products. We expect to progress in enhancing our R&D pipeline of differentiated vaccine candidates and cash will continue to be a focus with an emphasis on reducing our operating cash burn. Subject to a successful Lyme disease vaccine approval and commercialization, we expect to become financially self-sustainable and potentially profitable. With that, I hand the call back to Thomas to look at our future value drivers.

Thomas Lingelbach, CEO

Thank you so much, Peter. Yes. Well, let me turn to Page 21 and talk a little bit about the future. Of course, it will heavily depend on Lyme. And what is the significance of the Phase III results for Valneva? Well, positive results could be transformational, delivering substantial commercial milestone and royalty revenue to fund further pipeline development and value creation. It would also further validate Valneva's position as a leading vaccine biotech company and potentially becoming the first vaccine we have developed from bench to market. When we look at our key initiatives and what we really would like to do going forward, on the one hand, we would like to build scale in our R&D pipeline. This includes a potential strategic in-licensing to augment our in-house pipeline while creating a risk-balanced portfolio of innovative specialty life cycle and high-value vaccine assets. We created Valneva 13 years ago, with an investment theme and focus on vector-borne diseases. We would like to expand now beyond vector-borne diseases, targeting assets based on defined criteria. We have a couple of quite interesting programs in preclinical. Some of them are associated with AMR. But we have also a very interesting EBV program. All of that we expect to accelerate and bring into clinical development subject to positive Lyme data. And of course, there is room to optimize our integrated operations to control our value chain by investing in enhancing our end-to-end capabilities, and to structure our commercial model to optimize and maximize cash. With that outlook, hopefully an outlook based on positive data, I would like to turn back to the operator to take your questions.

Operator, Operator

Operator Instructions: We are now going to proceed with our first question. The question comes from the line of Maurice Raycroft from Jefferies.

Maurice Raycroft, Analyst, Jefferies

Looking forward to seeing the Lyme data soon. I know guidance is for first half '26, but you recently said you expect the data soon. Do you still see potential for a readout by end of first quarter? Or is it likely—could it get pushed to the second quarter? And also, can you talk about your involvement in the data analysis? I'm wondering if you have access to the data room and can see real-time updates on the number of adjudicated Lyme cases. And do you see the split between the vaccine and placebo?

Thomas Lingelbach, CEO

So Maurice, the responder for the Phase III study is Pfizer. Pfizer runs the trial and we do not control the execution of the study, and we are, at this point, fully blinded. There is an official guidance from Pfizer with regards to the data readout in H1. And of course, we can't say anything different. We are hoping that the data will come around mid H1, whenever this occurs. But I would like to remind everyone that there is only one official guidance, and that's the one from Pfizer.

Maurice Raycroft, Analyst, Jefferies

Got it. Understood. And can you comment on when the last time was you spoke with Pfizer on the program and what's the latest they're communicating to you based on status and timing?

Thomas Lingelbach, CEO

So we have a joint development structure. We have governance as per contract, which includes a couple of formalized bodies. We have weekly interaction, frequent interactions, and so far, so good.

Maurice Raycroft, Analyst, Jefferies

Got it. Okay. And maybe just last question. Just if you can remind us what gives you confidence that VLA15 will be equally efficacious in serotypes 2 through 6 versus serotype 1. Wondering if you tested serotypes 2 through 6 in preclinical challenge models similar to the 2024 publication that you had?

Thomas Lingelbach, CEO

Yes. So first of all, this is an excellent question. In preclinical models, different preclinical models, some of which have been published, others not yet, we have done passive and active immunization and tested against all serotypes. What we don't know is whether the immunological protection levels in humans will be identical across the different serotypes. We have a lot of grounds to believe that. But of course, as you know, Maurice, outside of serotype 1, which was shown through LYMErix and ImuLyme, there is no data in humans today that bridges immunological response with efficacy. Even for LYMErix, there was never a formal correlate of protection established, but there has been a publication that summarized a correlation factor of 0.8, so 80% correlation between immunological titers and protection. Of course, we hope to see the same. What gives us confidence is that in different animal models we have compared VLA15 against, I would call it, a LYMErix biosimilar. This has been shown and published in different publications, as I said—some not yet published. We have seen across the board non-inferiority or superiority after three doses. I think that is mainly what gives us confidence in addition to the immunological profile that we have observed across many different clinical studies. By the end of the day, data will tell and data will hopefully come soon.

Operator, Operator

We are now going to proceed with our next question. The question comes from the line of Brandon Folkes from H.C. Wainwright.

Brandon Folkes, Analyst, H.C. Wainwright

Congratulations on all the progress. Maybe just staying on Lyme. How do you think about capital allocation going forward if Lyme is successful? That obviously changes your capital profile potentially quite significantly. So how should we think about that aspect of the business?

Peter Buhler, CFO

Yes, Brandon, this is Peter. Well, I think it's important to remind everyone that upon positive Phase III data, we will not get any milestones under the program. The next milestones will be due upon first commercial sales. Essentially, it's first commercial sales in Europe and in the U.S., and it's a combined milestone of $143 million. But that's probably at least 1.5 years away from now. So in terms of capital profile in the short term, it's not really going to change. Then I think we would certainly want to accelerate and potentially augment our pipeline. That will, of course, take time to do, and we will consider carefully how we do that.

Brandon Folkes, Analyst, H.C. Wainwright

Great. And then maybe just on Shigella, S4V2, when we see the Phase II data later this year, how should we think about the threshold for Valneva moving forward with full development responsibility or perhaps other development partners on that program?

Thomas Lingelbach, CEO

Very good question, Brandon. The thing we like about this program is that it includes a controlled human infection model in adults. This means we will have adults challenged with one strain, namely Shigella flexneri 2a, and we will see what we call pilot efficacy. We will see whether people are protected and to which level they are protected. More importantly, we will get an indication of what level of immunogenicity is required for protection. This gives us, based on prior data, a first hint for the children population because there we don't challenge, but we will have a good understanding about the immunological threshold, provided that we see pilot efficacy and a decent level of correlation between immunological response and protection. That would allow us to progress this program further. If not, we have failed—and we would have failed relatively cheaply, which is the advantage of a program using a challenge model to see pilot efficacy ahead of extensive Phase III studies. We are planning for success. We are working on the development pathway going forward. As I mentioned earlier, we expect data from both studies mid-year. Then we will inform the market about the next development steps.

Operator, Operator

We are now going to proceed with our next question. The question comes from the line of Damien Choplain from Stifel.

Damien Choplain, Analyst, Stifel

Congrats on the good results. The first one is on the ACIP recommendation. When do you expect to receive an ACIP recommendation for VLA15, if approved? And do you believe a broad recommendation is achievable for this vaccine? If so, what would be the key criteria to get such a recommendation?

Thomas Lingelbach, CEO

First of all, predicting ACIP meetings, outcomes and dynamics is difficult given current geopolitical environment in the United States. Having said that, we believe Pfizer will progress fast post-approval into the ACIP process. Historically, ACIP reviews a couple of major criteria: risk-benefit, which considers the safety profile seen in the Phase III study, and the benefit of vaccination, which will be heavily driven by the final efficacy in different target groups and, importantly, against serotype 1, which is the most prevalent serotype in the United States. The other criterion is the health economic benefit. We know that the cost of treating Lyme is very high, so we believe the health economic benefit will be very favorable for vaccination, particularly for people living in high-risk areas. We hope to get a broad recommendation for people living in high-risk areas and representing a high-risk population in those areas, provided the data supports it. What this means in detail is hard to predict at this point in time, but we are very positive about a broad recommendation provided the data supports it.

Operator, Operator

We are now going to proceed with our next question. The question comes from the line of Vamil Divan from Guggenheim.

Vamil Divan, Analyst, Guggenheim

Two questions, one on Lyme and then one on IXIARO. On Lyme, I appreciate everything you said around Pfizer running the trial. Just curious what actually would be in the top-line press release—what should we expect in terms of what endpoints or information is planned to be disclosed? Anything you could share would be helpful ahead of the release. Second, on IXIARO—this was a specific question around the DoD contract because that has been an important source of revenues for that vaccine in the past. Do you have any information on where that might stand in terms of contract for this year or looking forward?

Thomas Lingelbach, CEO

On Lyme, we have previously communicated that we expect Pfizer to release top-line data. Top-line data is not clearly defined, but it will definitely include the primary endpoint and safety. Whether Pfizer decides to announce more than that is at their discretion. Valneva is currently not in possession of information regarding what else may or may not be included in the top-line Lyme release. Regarding the DoD, yes, we are expecting a new contract. IXIARO is broadly used in the U.S. military and we are the sole supplier under the current arrangement. It is the only licensed vaccine in the United States for that indication. We can expect a new contract this year.

Vamil Divan, Analyst, Guggenheim

Is there any timing around that—when that might happen—or is it too early to tell?

Thomas Lingelbach, CEO

I don't want to predict timing because we are talking about government contracting, and we have intentionally not guided on any timeline associated with this.

Operator, Operator

We are now going to proceed with our next question. The question comes from the line of Rajan Sharma from Goldman Sachs.

Rajan Sharma, Analyst, Goldman Sachs

First for Peter: Could you help us understand gross margin progression in 2026? There are a few moving parts in 2025. What are the pushes and pulls in '26? How much of that EUR 10 million or so in idle capacity costs are likely to reoccur in 2026? On in-licensing and M&A as part of the strategy to rebuild the R&D pipeline, could you discuss what that could look like in terms of size, structure and any specific areas or segments of focus? And a quick follow-up on the DoD contract— is that assumed within your revenue guidance for 2026?

Thomas Lingelbach, CEO

Where shall we start? Maybe I start with the pipeline evolution, then I'll let Peter talk about the financial questions. As I mentioned, last year we initiated a process to look at external opportunities in the same way we look at internal opportunities. This resulted in the in-licensing of our Shigella vaccine candidate, and we will continue doing that. We will now go beyond vector-borne diseases and beyond travel. We believe, planning for success, that many vaccine-preventable diseases are not currently covered by the big vaccine players. We have given a focus around enteric diseases in the context of AMR, and we have started our EBV program to build around a potential herpes franchise. These are the key areas we are contemplating. We have a dedicated team screening, scouting and evaluating, and we will decide on progressing internal or bringing in external opportunities in the coming months and years.

Peter Buhler, CFO

On gross margin, Rajan, there are a couple of things going on in 2025. I think the best way to look at it is by product. For IXIARO, it is relatively stable versus 2024. What happened in 2025 is it was a bit adversely impacted by the change from the Manson facility over to the Almeda facility—our new manufacturing site in Scotland—and related to that, a bit of lower volume in manufacturing, which leads to less effective overhead absorption. For DUKORAL, we had a very good gross margin up until the end of Q3; in Q4 we had a couple of batch write-offs that had a significant adverse impact. Regarding IXCHIQ, that was a big hit on cost of goods overall: the write-off we took on drug substance following the termination of the Serum Institute of India contract. Those doses are still available, the product is good and it has a long shelf life. If we manage to build a business in endemic markets in Asia, those doses could be written back and sold. To your question on idle capacity, yes, I would say the EUR 10 million is probably a number that will remain unless there is a major change in how we use our manufacturing facilities, which right now we don't see. We have overcapacities in both Sweden and Scotland. On the military question and the DoD contract, yes, it's included in the guidance for 2026 with the volume we assume right now. They have a right to order additional doses within the 12-month period, which they did and is then shipped after 12 months, which is why shipments continue under the old contract. We expect the new contract and that is included in the guidance.

Operator, Operator

We are now going to proceed with our next question. The question comes from the line of Simon Scholes from First Berlin.

Simon Scholes, Analyst, First Berlin

I've got two questions. First, on the chikungunya vaccine and the status of 1555, which I think is the candidate for the local manufacturer in Brazil. Second, following the suspension of the SII licensing deal, could you outline your next steps in Asia with regard to IXCHIQ?

Thomas Lingelbach, CEO

Both excellent questions. On 1555, the regulatory processes had slowed down the approval by Anvisa. Now that we have concluded all updates with the different regulatory authorities, including Anvisa—meaning clarifying age ranges, warnings and precautions—there's no reason for Anvisa to further delay 1555 approval. Hence, we are expecting it quite soon. Regarding our LMIC strategy in Asia, we decided to take control over commercialization and manufacturing of the product in Asia, given the growing medical need outside of the Indian territory. We are currently evaluating potential change of custody, potential partners, commercialization structures and manufacturing strategies. We hope to be able to progress and announce that in the latter part of this year.

Operator, Operator

We are now going to proceed with our next question. The question comes from the line of Suzanne van Voorthuizen from VLK.

Suzanne van Voorthuizen, Analyst, VLK

I have two questions regarding Lyme. Could you clarify if the first cohort of participants in the Phase III received a booster prior to the last peak season? And what about the second cohort of participants? Also, when will booster data be available, and will the booster data be part of the filing?

Thomas Lingelbach, CEO

We have not included a so-called second booster or dose 5 in the current primary analysis, which I assume is what you are referring to. In a success case we would augment and provide an additional booster dose. Our current hypothesis, as we presented at our R&D Day in New York, is that such a booster would not be part of the initial licensure process but could be included via a supplemental licensure submission. Details on timing and inclusion in filings will depend on the data and regulatory discussions.

Operator, Operator

We have no further questions at this time. I'll hand back to you for closing remarks.

Thomas Lingelbach, CEO

Thank you very much for having joined us today. It's been a pleasure. As I said, we are looking forward to our Lyme data—fingers crossed. I think Valneva has great prospects and great opportunities. Stay tuned. Thank you so much.

Operator, Operator

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.